Is USDT losing ground? The EU’s MiCA rules and the rise of USDC and RLUSD

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Is the European Union’s MiCA framework prompting investors to reconsider their loyalty towards Tether’s USDT and instead consider other options such as Circle’s USDC or Ripple‘s RLUSD?

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USDT under radar

Over a prolonged period, Tether’s USDT (USDT) has been the preferred stablecoin among traders and investors. However, as we enter 2025, its supremacy is showing signs of crumbling, particularly within the European Union, where increasing regulatory oversight and escalating competition are threatening its once impregnable standing.

2024 marked a significant shift when, on December 30th, the European Union fully enforced its Markets in Crypto-Assets regulations.

As a crypto investor, I’m always on the lookout for stability amidst the volatility of the digital currency market. That’s why I appreciate initiatives like MiCA that are working towards bringing order to this unpredictable landscape. Notably, MiCA has set strict compliance standards for stablecoin issuers, and key players such as Tether are now required to park 60% of their reserves in banks within the EU. This move adds a layer of security and reassurance for investors like me, knowing that our investments are backed by a solid foundation.

Under the newly implemented rules, Tether is finding itself navigating through a surge of redemption requests, fresh regulatory obstacles, and stiffening competition from competitors such as Circle’s USD Coin (USDC) and Ripple’s USD Stablecoin (RLUSD).

Previously, as a researcher examining the topic, I have noted the apprehensions expressed by Tether’s CEO, Paolo Ardoino, regarding potential “bank failures.” His argument is that such regulations could inadvertently make stablecoin issuers more susceptible to systemic risks, rather than mitigating them.

As a researcher, I’m continuing the dialogue with regulators regarding my earlier expressed apprehensions about the potential hazards that could impact stablecoins governed under EU regulations.

In simpler terms, it’s not wise to rely on uninsured cash deposits.

Reflecting on past events, let’s ensure we learn from what transpired with…

— Paolo Ardoino 🤖🍐 (@paoloardoino) April 11, 2024

As a researcher, I’ve noticed that the market appears more focused on Tether’s actions rather than its explanations. In other words, it seems like the market is paying closer attention to what Tether does (or fails to do) rather than why they are doing it.

As MiCA’s launch approached, approximately $4 billion in USDT was cashed in, representing the most significant redemption event since the 2022 cryptocurrency winter.

In the past, incidents such as the downfall of FTX and exposures of fraud within the sector caused a significant ripple effect across the cryptocurrency industry. Consequently, USDT’s market cap decreased from $83 billion in May to $65 billion by November, representing a 21% decline.

Although the recent drop is relatively minor, it holds significant underlying meanings. Currently, Tether’s market capitalization amounts to $137.5 billion as of January 9th, a decrease from $141 billion only two weeks prior.

The current situation raises the question not only about Tether’s ability to evolve but also whether the market will tolerate its adjustment process. With USDC solidifying its position in regulatory matters and RLUSD rapidly growing in popularity, is it possible that this marks a significant drop for the world’s leading stablecoin? Let’s delve into it.

Competitors closing In: USDC and RLUSD’s strategic advances

Investors have become concerned due to Tether’s unwillingness to adhere to stringent reserve requirements, while rival companies flourish within the newly established regulatory structure.

Despite the fact that EU member states have as long as 18 months to completely implement MiCA regulations, the market is not standing idle. Already, investors and trading platforms are adjusting their strategies, and it seems that USDT’s dominance in the market may be waning.

In a relevant scenario, platforms such as Coinbase and OKX have stopped offering USDT (Tether) to European users due to their failure to adhere to the regulatory requirements set by MiCA (Markets in Crypto Assets).

The USDC issued by Circle emerges as a notable winner due to regulatory changes. Obtaining MiCA approval in mid-2024, USDC has become the preferred stablecoin for exchanges aiming to adhere to European regulations.

The collaboration between Binance and Circle, focusing on boosting the usage of USDC worldwide, is driven by the increasing need for openness and adherence to regulations. Already, this strategic decision appears to be yielding positive results; the market value of USDC has surged by an impressive $2 billion since obtaining the license.

Simultaneously, the RLUSD by Ripple, introduced on December 17, 2024, is likewise becoming popular as a regulatory-friendly option.

The digital stablecoin, RLUSD, was designed to function smoothly across both the XRP Ledger (XRP) and Ethereum (ETH). During its testing period, it conducted a total of 35,643 transactions – 33,953 on the XRP Ledger and 1,690 on Ethereum.

Ripple’s big Moment as RLUSD gains momentum in a changing era

2025 might mark a pivotal moment for Ripple, with a series of legal triumphs, tactical alliances, and a pro-cryptocurrency government in the United States potentially offering ripe opportunities to strengthen its presence within the stablecoin sector.

As Donald Trump’s presidency could bring pro-crypto regulations, it might signal the end of Ripple’s ongoing legal dispute with the Securities and Exchange Commission, removing a significant hurdle for their expansion.

To begin with, Ripple has already achieved significant victories in its court case with the SEC, such as reducing a potential fine of $2 billion to only $125 million. This more lenient settlement gives the company the necessary space to concentrate on innovation and the launch of RLUSD once again.

Monica Long, the president of Ripple, has subtly suggested grand schemes for RLUSD. These include upcoming listings on significant stock exchanges to expand its influence and versatility.

In a recent interview with Bloomberg, it was mentioned that we’re broadening the distribution and accessibility of Ripple dollars across various trading platforms. Therefore, it’s likely that you’ll notice increased availability and more updates being announced shortly.

According to Monica Long, the President of Ripple, it is anticipated that the company’s newly developed stablecoin, RLUSD, will be available on additional platforms very shortly. Additionally, she hinted at the upcoming introduction of an Exchange-Traded Fund (ETF) based on XRP in the near future.

— Bloomberg Crypto (@crypto) January 7, 2025

Ripple’s robust payment services significantly contribute to the acceptance of RLUSD. Over the last twelve months, the transaction volumes handled by Ripple’s payment solutions have more than doubled, demonstrating their importance in simplifying international money transfers.

As a researcher, I find it intriguing to explore how digital assets such as RLUSD, known as stablecoins, could potentially revolutionize our current ecosystem. By providing businesses with an efficient and innovative alternative to conventional banking systems, they might streamline transactions, reduce costs, and foster a more dynamic and resilient economic landscape.

As Ripple broadens the accessibility of RLUSD, it’s plausible that businesses currently utilizing their payment services may opt to incorporate this stablecoin, potentially boosting its expansion even more rapidly.

Partnering with Chainlink, a prominent player in the blockchain oracle field, could potentially drive Synapse into the realm of Decentralized Finance (DeFi), extending beyond payment solutions.

As an analyst, I can attest that Chainlink’s robust infrastructure, which has facilitated more than $18 trillion in transaction value, sets the stage for a seamless integration of RLUSD within the Decentralized Finance (DeFi) landscape. This integration opens up a world of possibilities for both traditional and DeFi users, presenting them with novel opportunities to engage and benefit from this dynamic ecosystem.

As a market analyst, I find myself consistently observing the dominance of stablecoins in our current financial landscape. Specifically, the stablecoin market, currently valued at an impressive $206.2 billion, is primarily controlled by USDT, which accounts for approximately 66% of the entire market share. This underscores its significant influence and role within the digital currency ecosystem.

What to expect next?

Over the years, I’ve found myself invested in USDT, the undisputed leader in stablecoins. However, it’s been a roller coaster ride, with its commanding presence tainted by recurring queries about its transparency.

As an analyst, I’ve observed that Tether has persistently kept its value tied to the US dollar, yet concerns about transparency remain unresolved due to their hesitance to conduct comprehensive audits and persistent allegations of inadequate collateralization. These factors have significantly contributed to a sense of mistrust among many in the crypto community.

In the current scenario, USDC is emerging as a trusted choice, earning its credibility through regular audits and a strong emphasis on compliance. The latest endorsement it received under the MiCA regulations of Europe adds to its solid standing in that area.

As a crypto enthusiast, I’ve been keeping an eye on the growing popularity of Ripple’s RLUSD. With Ripple’s robust payment system, swift exchange listings, and smooth integration into the rapidly expanding DeFi sector, it’s no wonder that this newcomer is catching attention.

With MiCA establishing a definitive regulatory standard within the EU, it appears that the United States is gearing up to adopt similar measures. Indications from the Trump administration signal a rapid progression towards more favorable cryptocurrency policies, potentially leading the U.S. towards a responsible and accountable regulatory structure in the near future.

By these changes, it’s possible that the year 2025 could signal a power shift in the stablecoin market, with USDT currently holding the throne but the growing momentum of its rivals suggesting that a transition of power might be imminent.

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2025-01-10 03:07